Law Bridge

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International Commercial Arbitration
in Net Era

Co-author: Chambers Yang, Marshal
Chen & Morris Lin

With the globalisation of the world
economy, all kinds of the international disputes come out frequently.
Solving such dispute efficiently and fairly is very key to the development
of the global trade. It is noted that many traders usually like to choose
the international arbitration institution instead of the national court.
Such a common opinion depends on the inherent advantages lying in the
international arbitration.

The first advantage is impartiality.
It is well known that the international arbitration institutions are
usually organised by the independent organisations. For example International
Chamber of Commerce (ICC) that was founded in 1923 and headquartered
in Paris, the Stockholm Chamber of Commerce (SCC), the HongKong International
Arbitration Centre (HKIAC), and so on. They are not the hands of the
government. Whereas the national court is usually regarded as the part
of the national government, which is supported by the native finance
and will works for its native benefits. There is a common opinion that
there is always something in the biased judiciary behind the different
customs and languages in the different national courts.

The another important advantage of international
arbitration is that the parties are free to contract where, when and
how the arbitration will be conducted, which is called party autonomy.
For instance, ICC, one of the most famous international arbitration
institution, has its own set of rules which provides for greater flexibility
in allowing parties to choose which method of dispute resolution will
apply to their disputes. Like the ICC, the Stockholm Chamber of commerce
(SCC) allows for significant party autonomy in selecting the applicable
procedural rules to be followed by the arbitrators. Such common principle
makes international arbitration be accepted by the international business
community more and more. The relative parties can choose the rules that
are fittest for them.

The other important reason which makes
the international arbitration so popular is there are many multilateral
conventions, regional multilateral conventions and some bilateral conventions
that confirms the arbitrational awards shall be recognised and enforceable
in the ratified countries. Now the most popular convention is New York
convention of 1958 that is adopted more than one hundred states. It
succeeded on the basis of the 1927 Geneva Convention and the 1923 Geneva
protocol. Under the article III, each contracting state " shall recognise
arbitral awards as binding and enforce them in accordance with the rules
of procedure of the territory where the award is relied upon." There
are some important regional multilateral conventions. For example, the
Panama or Inter-American Convention of 1975 that was promulgated in
1975 has sometimes been described as a carbon copy of the New York Convention,
the European or Geneva Convention of 1961 which was adopted in Geneva
on 21 April 1961, the main purpose of that convention was to facilitate
the efficiency of arbitration within Europe and in particular between
the Western and Eastern European countries. The States from the Middle
East have also been willing to cooperate between them in the field of
arbitration and the most developed stage of their cooperation was the
execution of the Amman Convention on 14,April 1987. We can find out
that the conventions that deal with the enforcement of the international
arbitration award almost cover all over the world. Such widely conventions
set up the confidence to the international arbitration in the international
business community and make international arbitration much more popular.

There are also some other obvious advantages,
such as private, finality and less cost. Generally speaking, The international
arbitration is hold in private, which will be benefit for the resolution
of the disputes. Both parties can have a friendly talk. Compared with
the common litigation, the arbitration should be finality. Both parties
should enforce the award once it be issued. Also the fee for international
arbitration usually is cheaper than international litigation.

In fact the international arbitration
institutions are playing more and more important roles in the solving
the international disputes. The international arbitration institutions
also try their best to modify their own rules to catch more shares.
With the development of the Asia-Pacific economy, more and more international
commerce dispute arise. Since 1994, the Hong Kong international Arbitration
centre (HKIAC) and the China international economic Trade and Arbitration
Commission (CIETAC) together have processed approximately 1000 new cases
a year, with the vast majority being disputes between foreign parties.
In 1991, Singapore established the Singapore international arbitration
Centre. To compete for a greater share of the international arbitration
SIAC prints its communications and awards in both Chinese and English,
whatís more it adopted the international arbitration act (IAA), which
is based on the 1985 Model law on international commercial arbitration
published by the united nations commission on international trade law.

From the above introduction, we can
find out that the international arbitration play the important role
in the international business and every international commercial arbitrational
institution try its best to develop its share in the international arbitration,
but the way seems almost the same. They always pay attention to the
parties?autonomy. They continuously modify the rules for arbitration
so as to give the more choice to the parties to decide. To some degree,
the measure took some effect. But there are not some inherent changes.
It is well known the party autonomy is the basic advantage for the arbitration.
So if one institution wants to increase its share in the international
arbitration, it has to find out the existing real disadvantages and
overcome them.

As mentioned above, arbitration has
so many advantages comparing with the litigation. But it still has very
serious shortcomings, and the well-known main shortcomings are expense
and delay. Especially, with the rapid development of digital technology,
the procedure of international commercial arbitration seems obsolete.
Mr. Justice Landerís ever stated: the arbitration process has been perceived
?as having similar shortcomings to the litigation process. The perception
is that the procedures in arbitration are not much less cumbersome than
the procedures in the litigation process.

Arbitration is still slow and inconvenient.

Arbitration proceedings often take years.
Although it may be short than the litigation, it is too long for the
rapid development of new digital technology society. If it deals with
the hi-tech case, arbitration will become unsatisfactory procedure.
Paul D. Carrington ever stated: a few years ago, he met a lawyer from
San Francisco who had made twenty-four trips to Asia to participate
in the resolution of a single dispute. He reported that the arbitrators
who would listen to one witness a week. The witness came from diverse
places in Asia and North American. Although this case is a very extreme
example, it reflects the reality in some sense. The parties of arbitration
live in different countries, the arbitration institution is located
in another country, and maybe the arbitrators live in other countries.
All of them have to meet in certain place at certain time, but it maybe
need a long time to meet together. For instance, if one party is in
China, the other party is in Brazil; the arbitrators live in Australia,
Russia and the United States. The parties select the arbitration committee
in Stockholm, maybe Chinese party needs very long time to get the visa,
and Brazil Party is the same. Thus, all of them need spend a long time
to start hearing and it is obvious that how inconvenient it is. Sometime,
the hearing will be held several times. In some circumstance, in order
to correct consequential errors of the expediter, it might be necessary
to suspend the hearing while additional is added to the submission.
But such interruption will prolong the procedure and make the procedure
more inconvenient. The absolute claim that arbitration is quicker than
adjudication is simply no longer true.

Arbitration is still expensive.

The direct cost of arbitration mainly
includes: (1) the arbitratorís fee; (2) expenses for arbitrator travel
and hearing room rental; (3) the cost of site inspection or experts
appointed to assist the arbitrator; (4) legal fee.

Among these fees, legal fee usually
takes up most part of the whole cost. The parties have to appoint lawyers
to deal with the dispute except very simple case, because the law is
very complexity. Legal fee main depends on how much time the attorneys
spend. The longer the procedure lasts, the more legal fee is charged.
At the same time, the disputes are often concern with professional knowledge,
arbitrators have to appoint experts to assessment. The expense of employing
these professionals is very high. In addition, the parties and their
lawyers and arbitrators usually live in different countries, they have
to make international trip to deal with the disputes. The transport
fare is also very high. Hence, slow processing of arbitration will waste
time and leads to the higher expenditure.

At present, because of these disadvantages,
arbitration has been facing significant competition over the last few
years from new tools of alternative dispute resolution (ADR) such as
negotiation, mediation, conciliation, and mini-trials. These ADR mechanisms
have been consistently advanced as alternative meant either to complement
arbitration or to displace it altogether. So, arbitration institutions
must make use of the advantage of new digital technology to short the
processing, decrease the inconvenience and low the expense.

With the quick development of the Internet,
e-commerce plays a more and more important role in economic growth.
The development of e-commerce also makes online arbitration possible
and necessary. The benefits of online arbitration are obviously. The
first, convenient. The Internet has created new opportunities for parties
to communicate and to engage in transactions at great distance. At the
same time, the potential for disputes arising out of such communications
or transactions between parties that are physically remote from each
other has been increased. On-line facilities can eliminate the barrier
of distance. There is no need for the parties and their lawyers and
the arbitrators to travel from one side of the Planet to the opposite
side. The second, speed. Speed is equal to distance divided by time.
The elimination of the barrier of distance by the Internet and the use
of the Internet as the medium for resolving disputes will increase the
speed with which the dispute-resolution process can be conducted. The
third, affordable. Since the cost of post and travel is reduced, and
the duration of the proceeding is decreased, the arbitration cost will
be decreased accordingly, thus the total cost will be reduced to an
affordable level.

Is online arbitration feasible?

Firstly, most parties to the international
commercial disputes have the requisite technical facilities to participate
in the on-line resolution of the disputes.

Secondly, if arbitration is conducted
online, communication is the most important aspect. Nowadays, documents
can be sent in electronic form such as by e-mail. But when it is deemed
to be sent? And how to prove it? The United Nations Commission on International
Trade Law (UNCITRAL) has completed its Model Law in 1996. It is intended
to provide national legislators with a set of basic rules that would
remove a number of existing impediments to the encouragement and growth
of electronic commerce. Although it is not a treaty or convention, it
has been enacted in whole or in part or used as the basis for legislation
in some countries. Singapore enacted its Electronic Transactions Act
1998, and Australia has also enacted its Electronic Transactions Act
1999 (Cth). The United States of America has also prepared the Uniform
Electronic Transactions Act (1999) for being approved by the states.
Chinaís new Contract Law also includes some general provisions about
electronic information transferring. The basic rules of these legislations
are similar. All these legislations provide a legal framework for e-commerce
as well as online arbitration.

Thirdly, some worry about security risks
and authentication. The major impediment to the development of electronic
commerce is the inherent security risk involved in transferring information
over the Internet. It is the same to the online arbitration. When a
message is sent over the Internet, any of the information may be intercepted,
read and altered. There are two major concerns: first, identification
integrity: you are who your signature says you are; and secondly, message
integrity: you may have sent the message but has it been tampered with
in between the time that it was sent by the sender and received by the
intended recipient? These concerns create problems for both parties
to the communication.

However, encryption techniques are now
available to prevent this interference by encoding the relevant data.
The primary purpose of public/private key encryption is to maintain
message integrity in the sense that the message can be identified as
having originated from the person with access to that private key, that
is, identification integrity. To some degree it also protects the security
of the information in transit, although it may be read by anyone, in
addition to the addressee, who has the sender's public key. There are
some other technological solutions based on encryption techniques. Secure
Electronic Transactions (SET) protects the confidentiality of the transmission
and ensures the authentication of the user. Secure Sockets Layer (SSL)
is a protocol to provide security for Web transactions by encrypting
packets of information transmitted to the Internet site. The digital
or electronic signatures are principally concerned with ensuring message
integrity. They ensure that the sender is the person whom they purport
to be. Some countries have enacted their legislations on digital or
electronic signatures.

In addition there are other general
concerns about unauthorised access. The installation of a firewall will
prevent unauthorised access to company data.

Fourthly, several dispute-resolution
service providers are working on the development of on-line systems
for administering dispute resolution, as well as courts in a number
of countries. The World Intellectual Property Organization (WIPO) Arbitration
and Mediation Centre has developed such an on-line system, which is
Internet-based. Digital communication tools have been designed to allow
the parties to file requests by completing electronic forms and to exchange
information on-line through secure channels. The parties and the decision-maker
are able to communicate electronically also through audio and video
facilities, where these are available to them. The system also includes
such functions as automatic notifications, an electronic fee system,
secure facilities for the on-line exchange and reading of documents,
and back-end databases to support the logging and archiving of submissions.

In fact, some organizations have already
tried to conduct arbitration or similar procedures online. The WIPO
recommended using on-line facilities to conduct the administrative dispute-resolution
procedure on the domain name disputes. Based on the WIPO's recommendation,
the Internet Corporation for Assigned Names and Numbers (ICANN)
has approved four dispute-resolution service providers to conduct
online dispute-resolution procedures.

What should online arbitration be?

To conduct arbitration online, the international
commercial arbitration institutions should first adopt special online
arbitration rules and develop online systems. All the arbitration institutions
adopt similar arbitration rules. It needs to amend the existing rule
slightly to conduct the online arbitration. Most of the modification
should be concentrated on communication rules.

In our opinion, at the beginning stage
of an arbitration case, the basic communication procedure should be
as follows:

the complainant submits its complaint to arbitration
institution through e-mail or other electronic forms;

the arbitration institution creates a sub-system
(or channel) for this case in particular and nominate a case administrator,
only the case administrator is entitled to enter the system and communicate
with the parties and the arbitrators;

the case administrator informs the complainant and
the respondent the system address and entry password, forward the
complaint to the respondent;

the parties select the arbitrators according to the
arbitration rule, and the arbitration institution sets up the panel
to hear the case;

the administrator informs the arbitrators the system
address and entry password.

Thus, the parties and the arbitrators
can send documents to the special system of the arbitration institution,
and the arbitration institution can send or forward relevant documents
to them. But the parties should not communicate with the arbitrators
directly. It shall be the responsibility of the sender to retain records
of the fact and circumstances of sending, which shall be available for
inspection by affected parties and for reporting purposes

When the panel is ready to hear the
case, the case administrator informs the parties and the arbitrators
the time and entry password to enter the conference system, such as
teleconference system, videoconference system and web conference system.
If in special circumstance, the parties require or the panel thinks
it is necessary to here in-person, there should be such a hearing. If
the parties agree to hear the case by e-mail, then it is unnecessary
to have a conference and the hearing should be based on the documents.

At earlier stage, since the parties
and their lawyers and arbitrators maybe are not expert in conducting
arbitration online, there should be both existing rules and the special
rules for online arbitration, and model arbitration agreement should
be provided. Online arbitration rules only apply to the parties have
selected the online arbitration and the e-mail address or other electronic
communication measure are available. All the documents should be sent
both online and via mail.

In conclusion, we think if arbitration
is conducted online, the advantages of arbitration will be maximized,
and the disadvantages will be minimized, and arbitration will play a
more important role in international business. Actually, the relevant
arbitration institutions are forwarding to this objective. The WIPO
International Conference on Dispute Resolution in Electronic Commerce
is in processing now, and online arbitration is one of the hot topics.

Footnotes:

http://www.iccwbo.or/arb/23htm

The Arbitrator Vol 14, No.3, Nov, 1995, pp. 169

Most International Chamber of Commerce (ICC) arbitrators
these days last between 2 and 3 years. See III. a of "An Inside
View of the ICC Court" by Robert H. Smith in Arbitration International,
10/1, 1994.

For a historical study of the subject, see Lord
Mustill, Arbitration: History and Background, 6 J. INT'L ARB. 43,
55 (1989)

WIPO, Final Report of the WIPO Internet Domain
Name Process, THE MANAGEMENT OF INTERNET NAMES AND ADDRESSES: INTELLECTUAL
PROPERTY ISSUES, Para 211, available at http://wipo2.wipo.int/process1/report/finalreport.html
.

Melissa De Zwart, Electronic Commerce: Promises,
Potential and Proposals, available at http://www.law.unsw.edu.au/unswlj/ecommerce/zwart.html